Results 1 to 2 of 2

Thread: HBOS £4bn rights issue is massive flop

  1. #1
    Featured Member
    Joined
    Nov 2006
    Posts
    950
    Thanks
    1
    Thanked 651 Times in 272 Posts

    Default HBOS £4bn rights issue is massive flop

    http://www.guardian.co.uk/business/2...s.rightsissues

    HBOS, Britain's biggest mortgage provider, will tomorrow reveal that its £4bn rights issue to raise extra capital to cope with the credit crunch has been one of the biggest fund-raising flops in UK corporate history.

    Almost all the new shares on offer to existing investors will be left with underwriting banks Morgan Stanley and Dresdner Kleinwort, making it the highest profile funding failure since the stock market crash of 1987 saw underwriters saddled with most of a £7bn share issue by oil giant BP.

    The HBOS take-up will be far lower than the 19 per cent who subscribed to last week's Barclays offer, which had to be rescued by 'anchor' investors such as the Qatar Investment Authority.

    But as soon as HBOS makes its announcement about the poor take-up, Morgan Stanley and Dresdner Kleinwort will offer 2.5m new HBOS shares to big City investors.

    Under the terms of the underwriting arrangements, Morgan and Dresdner must try to place the 'rump' of the offer with institutions, as long as the market price is the same as the rights issue price of 275p, or higher.

    HBOS shares closed above the rights price on Friday, but were below that level at 11am when the offer formally closed. Because the shares had been trading below the rights issue price for several weeks, shareholders shunned the issue as they could buy HBOS shares for less in the market.

    Almost all of HBOS's 2.1 million small retail investors boycotted the issue. If the market turns against HBOS tomorrow, the underwriters and sub-underwriters will be forced to hold on to the stock until they can sell at a profit.

    HBOS will stress that it will still receive its £4bn as the issue is fully underwritten, which means that it gets the money, no matter how poor the take-up.

    Since it announced the offer in April, sentiment has turned against banks with a vengeance as the UK and US housing markets have deteriorated further amid rising fears of a fully-fledged recession. Many banks, including HBOS, have seen their stock prices fall by as much as 45 per cent in the last 10 weeks.

    Research for The Observer by Data Explorers shows that the downward pressure on shares has been exacerbated by short selling, with nearly 15 per cent of HBOS's shares on loan to short sellers last Tuesday. Short sellers, typically hedge funds, borrow stock from institutions and take a bet that the shares will fall, pocketing the difference in price.

    The amount of Bradford & Bingley stock on loan amounted to 18 per cent. At Alliance & Leicester it was 19 per cent.

    The Financial Services Authority is understood to have leaned on A&L to accept a takeover by Santander amid fears that credit crunch has much further to run.

  2. #2
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: HBOS £4bn rights issue is massive flop

    we'll see whether the UK gov't comes to the rescue by buying up stock shares that no investors seem to want, a la recent promises by the US Fed / Treasury to buy up Fannie Mae and Freddie Mac shares under similar circumstances !

Similar Threads

  1. Old friend, new name, massive update!
    By MrsNolaManager in forum Coming Out
    Replies: 10
    Last Post: 03-15-2011, 02:33 AM
  2. Massive Bruise
    By WhiteTara in forum Body Business
    Replies: 10
    Last Post: 10-19-2006, 06:01 PM
  3. Flip-Flop shoes are tacky
    By Sinn in forum Stripping (was Stripping General)
    Replies: 48
    Last Post: 06-08-2006, 02:32 AM
  4. Massive Attack
    By TankGirl in forum Music Mix
    Replies: 19
    Last Post: 05-31-2006, 02:38 AM
  5. Massive Drama
    By NikkiWest in forum Stripping (was Stripping General)
    Replies: 13
    Last Post: 03-16-2005, 07:49 PM

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •